Financial aid administrators occasionally encounter families whose
income seems insufficient to support the family, such as families with
low, zero or negative AGI. For example, a student might be independent
by age or marriage, yet not earn enough money to provide for basic
living expenses such as food and shelter. Although self-sufficiency is
not required for independent student status, low income can suggest
the presence of unreported sources of direct and indirect
support. Alternately, if the student is living off of assets, it can
suggest the presence of unreported assets. Financial aid
administrators should try to elicit information about the other
sources of income and support, and then use professional judgment to
make appropriate adjustments or corrections to income and assets and
the worksheets.

This issue should be approached with sensitivity, since the family may
have accurately and fully reported their income. It is best if the
institution establish a written policy requiring verification of
such applications. This allows the financial aid administrator to
indicate that such verification is routinely required of applications
that meet the specified criteria, instead of having to say that the
family is suspected of underreporting income. Some schools verify all
applications with reported income below particular thresholds. Others
verify all Pell-eligible applications.

To identify families with unreasonably low income, one could note
that the Income Protection Allowance (IPA) is a kind of minimum
non-discretionary expense for modest living expenses. It is based on
allowances for food, clothing, personal care, medical care, shelter
and transportation. If the family's total income (AGI + Worksheet A +
Worksheet B - Worksheet C) is not at least the IPA, it is difficult to
understand how the family was able to meet its basic needs.

There are two possible sets of IPA figures, the parent IPA figures and
the student IPA figures. For 2007-2008, these figures are:

Student IPA Dependent: $3,000

Student IPA Independent Single: $6,050

Student IPA Independent Married (1 in college): $9,700

Parent IPA (2 in household and 1 in college): $15,000

Per additional family member: + $3,590

Per additional college student: - $2,550

Another possible source of baseline income is the
HHS Poverty Guidelines.
For 2006, the base figure for a family size of 1 is $9,800
for the continental US, plus an increment of $3,400 for each
additional family member. The HHS Poverty Guidelines are a
simplification of the
Census Bureau's Poverty Thresholds,
commonly referred to as the "Poverty Line".
The 2006 poverty line figures are basically $10,488 for a single
individual plus approximately $3,000 to $5,000 per additional
individual.
(See also the College Board's
Living Expense Budgets.)

Clearly, someone can still survive below the poverty
line, especially if they are young and in good health. So
although one should be suspicious if someone reports income
below the poverty line, it isn't unreasonable for them to
be able to survive below the poverty line.

The poverty thresholds aren't actually intended to be a
precise description of what people need to live. The original
poverty thresholds were developed in 1963-64 using US Department
of Agriculture food budgets for families under economic stress,
plus statistics on the portion of income families spend on food.
The original poverty line was calculated as three times
the economy food plan. It has been adjusted for inflation ever since.

It is probably best to use the IPA figures as a threshold, instead of
the poverty line, as they are more closely connected with the
need analysis formula. Note that Section 402B(g)(2) of the Higher
Education Act defines "low income" at 150% of the poverty line.

This suggests checking for alternate sources of support when an
independent student reports less than $9,000 in income
(+ $3,000 per additional family member). Extra scrutiny should be
applied to any independent student reporting less than $5,500 in income
(+ $3,000 per additional family member). (These figures have been
rounded to simplify the heuristic.)

Students with unusually low income will be flagged on the ISIR.

In such cases, the student should be asked to complete a form that
asks for the information specified on FinAid's
support test form.
This covers basic food, clothing, shelter, and medical expenses.
If any figure seems low as compared with the financial aid
administrator's expectations or the
IPA-related percentages
(e.g., food should be at least
30% of $5,500 = $1,650 for a single student), probe for more
information. Often you'll find that the student was living with
a friend and didn't mention that friend as a source of support. But
in about 5% of cases you'll encounter students wearing
$400 Coogi sweaters and carrying $500 Coach handbags who report
income insufficient to support their apparent lifestyle, and
you'll discover that this independent student lives rent-free
in an apartment owned by their parents.